It’s decided: you are going to renovate your kitchen which is in dire need of updating. But where are you going to find the thousands of dollars to do this work? Here are some possible solutions.
The loan or mortgage line, the line of credit and the personal loan are some of the tools usually used to finance renovations.
Mortgage refinancing
Soaring real estate prices have hurt many new homeowners. On the other hand, it has also made life easier for those who have owned their homes for several years. “Homeowners who had little equity and struggled to borrow saw the situation dramatically change with soaring prices. Indeed, since you can borrow up to 80% of the market value of your property, their borrowing capacity has therefore greatly increased, ”explains Denis Doucet, spokesperson for Multi-Prêts Hypothèques.
To obtain it, you must ask your financial institution for refinancing at the time of mortgage renewal.
With the historically low interest rates that we are currently experiencing, this option is very advantageous, especially since the loan is spread over the entire term of the mortgage. “From a budgetary point of view, it is therefore a relatively easy option to manage,” indicates Denis Doucet. This does not apply to people who have just acquired a property, however, since they still have little equity available to them.
Please note: mortgage refinancing requires going back to the notary, with the costs that this generates. Do your math to see if another option might not be more appropriate.
Add a tranche to your mortgage
To avoid having to pay notary fees, adding a simple installment to your mortgage can be a good option. Again, you could benefit from the current very low interest rates. Keep in mind, however, that you will have two maturities and two different interest rates on your mortgage, which could result in penalties if you sell your home early. However, some institutions agree to align the two deadlines.
Opt for a home equity or personal line of credit
The home equity line of credit is secured by your property. Although interest rates are higher than refinancing or adding a tranche to your mortgage, they are still lower than those of a traditional line of credit or even a personal loan. Both of these types of margins are flexible and convenient because you only use the amount you need. But be disciplined and make a repayment plan for yourself so you don’t make that debt last forever. Indeed, only the interest is payable each month and you might be tempted to repay only this and not the principal.
Personal loan and credit cards
Unlike a line of credit, with a personal loan there is a fixed term and amounts to repay each month. Interest rates are much higher than for a mortgage or personal line of credit, which makes it less attractive. However, it may be appropriate for work that does not require large sums, a few thousand dollars for example.
As for credit cards, given their high interest rates (generally 19.9%), they remain an instrument to be used only when absolutely necessary.
ADVICE
- When planning your renovations, allow sufficient leeway, recommends Denis Doucet. “The prices of materials have increased a lot and there are often surprises when renovating. Calculate 15% to 20% more money, which will save you from having to resort to your credit cards to deal with the unexpected. ”
- Entrepreneurs who are members of the APCHQ can offer consumers a loan to finance their renovation work. This program, carried out in partnership with Fairstone, offers loans at attractive rates of up to $ 30,000, repayable over a period of 12 to 60 months, or even before maturity, without penalty. Check with your contractor.
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